China’s October export performance and
Australia’s housing finance growth both serve to remind
investors that there are plenty of “green shoots” for
world economies at present and that the US “Fiscal
Cliff” represents a risk in both directions. Improved
consumer sentiment, signs of life in housing markets and a
levelling out in China’s economy all potentially form a
decent base for improved markets in 2013 if US politicians
are able to negotiate a confidence building solution to the
fiscal problem.

The Australian stock market has
outperformed the US markets since the Presidential election
and this may continue under present conditions. While a
major fiscal drag on the US economy would reverberate
through all world economies, the recent decline in US
markets also reflects positioning for the risk to US
investors posed by the potential for removal of tax
concessions on dividends and capital gains as part of any US
fiscal agreement.

Today’s housing finance figures are
encouraging for those investors seeking refuge in bank
dividend yields in recent months. Loan growth follows an
uptick in building approvals over the past couple of months
and increases the probability that bank stocks can continue
to provide investors with an attractive yield while at the
same time achieving moderate earnings growth.

The August
peak at 4403 remains a key support level for the S&P/ASX 200
index. While the market remains above this level, the
chances are that the current correction will be relatively
shallow and the impact of fiscal cliff nerves relatively
contained. A break below that level would indicate more
serious investor pessimism and a correction of the whole
rally from the June low at 3985. That could see a test the
200 day moving average at around
4280.

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• For car owners, a 13% reduction in the average Motor Vehicle levy • For businesses, a 10% reduction in the average Work levy, and changes to workplace safety incentive products • For employees, due to an increase in claims volumes and costs, a 3% increase in the Earners’ levy. More>>